1. Specialization and production possibilities

Suppose Japan produces only smartphones and tablets. The resources that are used in the production of these two goods are not specialized?that is, the same set of resources is equally useful in producing both tablets and smartphones.

The shape of Japan's production possibilities frontier (PPF) should reflect the fact that as Japan produces more tablets and fewer smartphones, the opportunity cost of producing each additional tablet_________(decreases, increases, remains constant).

The following graphs show two possible PPFs for Japan's economy: a straight-line PPF (PPF1) and a bowed-out PPF (PPF2).